For his own sake and that of the country, the Prime Minister David Cameron has
to make the case for staying in the EU

David Cameron is not the only political leader in Europe facing a public backlash. Before the financial crisis, European mainstream parties of the Left and Right could count on roughly 75 per cent of the vote. This year, that support has dropped to nearer 55 per cent, with fringe nationalist and populist parties the beneficiaries.

The difference with Ukip is that while it poses as independent, it is, as Nigel Farage has made clear, harnessing popular support so as to force change inside the Conservative Party – a change of leader and a policy of immediate withdrawal from the EU. In this respect, they are a party within a party.

Every time the Prime Minister makes a further concession to his anti-European backbenchers he is notching up a further advance for Ukip. He may genuinely have thought his January referendum commitment would be enough to see them off but instead it has given them a new lease of life, as the recent local elections and opinion polls have demonstrated.

Labour in the Eighties paid the price for indulging its own hard Left for too long before Neil Kinnock, realising that his party’s future was threatened, fought back against them and won. Similarly, the Republicans allowed the Tea Party to grow in influence, with fatal electoral consequences.

Both for his own sake as well as the country’s, the PM cannot allow Ukip’s appeal to spread further without pushing back against their isolationist demands. They may have succeeded in legitimising these by hitching certain Tory grandees to their wagon, but this is all the more reason for Mr Cameron to draw a line now, plant his flag firmly in the ground and fight back. He has to put long-term policy ahead of short-term political tactics.

The uncertainty about Britain’s future position is already damaging investors’ confidence and the economic recovery. The Government’s ability to forge alliances for a reform agenda in Europe is being weakened by others’ belief that we are simply being dragged towards the exit – why should Berlin or Paris bother finding agreement if they think we are on a one-way ticket out of the EU? And left unchecked, populism will drive voters further in extreme and unpredictable directions as the next general election approaches, with consequences for all the mainstream parties.

The ground on which Mr Cameron chooses to fight must be Britain’s economic interests and the future of our national prosperity. He must be clearer about the reform agenda he is pursuing based on his economic liberalism, belief in free trade, the priority he attaches to jobs and growth and the urgent need to boost Europe’s competitiveness and strengthen its single market. He may be frustrated that the fog of internal war is clouding his message but he has to rise above this because, ultimately, it is where he will pick up allies, at home and in the EU.

Mr Cameron is right to highlight the advantages of a new EU-US trade deal – it would be worth billions to our manufacturers and service providers. But make no mistake: Britain can only obtain the benefits from such trade deals by negotiating as a bloc with the rest of the EU. When I was Europe’s trade commissioner, at the same time as pushing talks to liberalise world trade as hard as I could, I launched bilateral negotiations with India, Korea, South East Asia and across Latin America, as well as updating Europe’s trade agreements in Africa. Success was worth major new export opportunities for British companies, their employees and shareholders. In not a single case could I have opened these negotiations if I had been representing Britain alone because our market, by itself, is simply not big enough for others to negotiate with.

Global markets in the emerging economies of Brazil, Russia, India, China and South Africa are important, but we represent a small fraction of these countries’ imports, they remain far more protected than Europe’s market and will take time to grow demand for the more sophisticated goods and services Britain specialises in.

As for financial services, it is simply not possible to see how the City of London can continue as Europe’s financial hub without being an integral part of the single market. This does not mean joining the euro; it does mean ensuring that when decisions are taken in the eurozone they take account of the interests of our financial sector.

This goes to the crux of the anti-Europeans’ argument: they believe that it is possible to love the single market but hate the EU; that we can continue trading at will in Europe, with the same privileges as now, without being part of its policy-making, its regulatory rules and its policing of the market’s openness. This is a grave deception. As the eurozone integrates further with Britain on the outside, we need to maximise our influence over these decisions as a full member of the EU, not throw in the towel.

All the party leaders need to make clear that quitting the EU would be a colossal indulgence. It might fill many with a sense of pride in Britain’s separateness, but it would also mean greater isolation, less trade, smaller influence and fewer friends. In the globalised economy of the 21st century, where production networks and supply chains stretch far across national borders, size – of markets, trading power and negotiating clout – matters more than ever. An isolationist Britain would be weaker and more vulnerable. That must not be our destiny – and the Prime Minister’s job, along with Ed Miliband and Nick Clegg, is to say so, loudly and firmly.

Lord Mandelson is a former secretary of state for business and is co-president of British Influence, a campaign to keep Britain in the EU